No sector comes close to energy this year.
It’s crushing every other sector, as the State Street Energy Select SPDR ETF (XLE) is up 26% so far in 2026 – more than double the return of the next-best sector.
And the war in Iran is only one part of the story.
Energy has consistently been the top performer all year.
But is this uptrend sustainable? Or would a de-escalation of the war mean an end to the bull market in oil and gas stocks?
This isn’t an academic question.
I commented yesterday that “as soon as we hit a certain economic pain threshold, Trump can simply decide that the Iranian regime has been degraded to the point that it no longer poses a threat and pull the troops home.”
That may be happening now.
President Donald Trump noticeably softened his tone yesterday afternoon, saying that the war was running ahead of schedule and that he expected it to be over “soon.”
Before we dig deeper into energy, I want to make a quick point about trading around the president’s comments.
It’s no secret that Trump is unpredictable. Whether you think that’s a good thing or a bad thing depends on your political views, but I’m not here to discuss politics.
I’m here to make money.
As a practical matter, that means trading where I know I have an edge, and I have no edge in handicapping Trump’s next move. He’s simply too unpredictable.
As I mentioned yesterday, Trump watches the stock market and tends to back off on policies that roil the market. But trying to time that exactly is a fool’s errand.
This is why I follow my system.
I may not know with precise accuracy when Trump wraps up this war… or starts a new one.
But I do know that “Bullish” rated stocks on my Green Zone Power Ratings system tend to outperform the market by double on average and that “Strong Bullish” stocks tend to do so by triple on average.
There’s no guesswork there. I have decades of data to inform my decisions.
And right now, I can tell you that energy remains the single most “Bullish” major sector in the entire S&P 500 Index.
With that said, let’s dig in.
A Peek Under the Hood
Fifteen out of 21 stocks in the energy sector rate as “Bullish” on my Green Zone Power Ratings system. Five rate as “Neutral,” and only one rates as “Bearish.”
Normally, I emphasize to choose carefully when picking stocks in a sector.
But in this case, you could throw darts at a random list of energy stocks and probably walk away with a really strong portfolio.
The energy sector was already looking great before the Iran war broke out.
Now, with Middle Eastern supply bottled up in the Strait of Hormuz, the outlook is even better.
Let’s dig deeper to see which factors contribute the most to the “Bullish” ratings.
Where Do Energy Stocks Pick Up Points?
One thing stands out immediately.
There isn’t a single dominant factor. Energy stocks are “Bullish” across all factors. (A score of 60 or greater is “Bullish.”)
The least “Bullish” factor is growth, and yet a majority of the energy stocks – 12 out of 21 – are “Bullish” on growth.
In total, 17 out of 21 rate as “Bullish” on quality, which is a testament to their high profitability and strong balance sheets. And 15 rate as “Bullish” momentum, while 14 rate as “Bullish” on momentum and volatility.
Let’s dig deeper into the momentum factor.
I filtered the sector for all stocks with an overall “Bullish” Green Zone Power Rating, then ranked them by their momentum score.
My goal was to highlight the energy stocks that have really been flying this year in spite of the chaos.
ExxonMobil (XOM) tops the list with a momentum rating of 87. You’re not getting a lot of growth in ExxonMobil – the world’s largest private-sector energy company rates a modest 34 on its growth factor.
Oilfield servicers Baker Hughes (BKR) and Halliburton (HAL) also earned momentum ratings well over the “Strong Bullish” threshold of 80.
Neither rate as “Bearish” on any of their major factors.
Perhaps the most balanced stock on the list is oil refiner Valero (VLO).
Along with fellow refiners Marathon Petroleum (MPC) and Phillips 66 (PSX), it rates as “Bullish” or “Strong Bullish” across all factors.
I mentioned all three refiners yesterday, noting that the closure of the Strait of Hormuz gave them a fantastic opportunity to step into a supply void.
But I would also reiterate that all was looking great before the war broke out, so this is by no means purely an Iran story.
To good profits,
Adam O’Dell
Editor, What My System Says Today
